Tax Policy Issues Relevant to Captive Insurance Companies in Alberta
4 October 2022
12 See the definition of “financial institution” in subsections 149(1) and 123(1) of the ETA, the definition of “listed financial institution” in subsection 123(1) of the ETA and the definition of “selected listed financial institution” in subsections 225.2(1) and 123(1) of the ETA. [...] For example, Alberta requires the purchaser of insurance to pay a regulatory charge equal to 10 per cent of the premiums paid to an unlicensed insurer.19 While Ontario also imposes premium taxes on the purchasers of unlicensed insurance in Ontario,20 the premium tax rate is the same as the rate payable by licensed insurers.21 To protect their premium tax base, provinces have also enacted unfair di. [...] 34 The CRA’s position is that central management and control must be established in the designated treaty country in order for the affiliate to be resident in that jurisdiction for the purposes of the Regulations regardless of whether the foreign affiliate is deemed to not be resident in Canada for the purposes of the ITA: Technical Interpretation 2000-0054455 dated October 23, 2001; Technical Int. [...] The core of the GloBE regime is the income inclusion mechanism, which causes the ultimate parent entity to include in its income an amount that will generate sufficient residence country tax payable to increase the total tax on the undertaxed source country to the 15 per cent minimum rate.74 If the ultimate parent entity is not resident in a jurisdiction that has enacted an income inclusion mechan. [...] Captive insurers that are part of MNE groups that are within the scope of the GloBE rules would be subject to the 15 per cent minimum tax, but these captive insurers may be generating large enough profits that the eight per cent spread between the effective tax rate in a tax haven and the combined federal-Alberta 23 per cent corporate tax rate would result in a substantial incremental tax cost.